What are bonds and how do they differ from stocks?

Bonds are debt instruments issued by corporations, municipalities, or governments to raise money. When you buy a bond, you're essentially lending money to the issuer in exchange for periodic interest payments (called coupons) and the return of the principal at maturity. Bonds are generally considered less risky than stocks and provide more predictable income. In contrast, stocks represent ownership in a company. When you buy a stock, you become a partial owner (shareholder) and can benefit from dividends and capital appreciation if the company grows. Stocks are typically more volatile and offer higher potential returns than bonds, but they also carry greater risk, including the possibility of losing your investment if the company fails. Bonds are prioritized over stocks if a company goes bankrupt.